Buy Adani Ports and SEZ; target of Rs 1050: Motilal Oswal

Motilal Oswal's research report on Adani Ports and SEZ

Adani Ports & SEZ Ltd (APSEZ) reported a revenue growth of 28% YoY to INR66.5b in 2QFY24 (11% above our estimate). During the quarter, APSEZ recorded ~17% YoY growth in cargo volumes to reach 101.2 MMT (flat QoQ). EBITDA margin came in at 58.4% in 2QFY24 vs. our estimate of 62.6% (down 420bp YoY, down 170bp QoQ). The margins were adversely impacted by higher operating expenses. EBITDA increased 19% YoY to INR38.8b, while APAT increased 17% YoY to INR22.2b (vs. estimate of INR 20.5b). In 2QFY24, Port revenues grew 13.3% YoY to INR50.5b. EBITDA margins in the Ports business stood at 72% in 2QFY24 (69% in 2Q FY23). Logistics revenues grew 34% YoY to INR4.8b. EBITDA margins in the Logistics business stood at 30% in 2QFY24 (32% in 2QFY23).

Outlook

We have raised our EBITDA estimate by ~10%/3% for FY24/FY25 to incorporate the improved outlook in ports and logistics business. We reiterate our BUY rating with a revised TP of INR1,050 (based of 15x FY25E EV/EBITDA).